Are you getting ready to make an offer in Brownstown or the Downriver area and wondering how much earnest money you should put down? You are not alone. This small but important deposit can help you win a home and protect you if things do not go as planned. In this guide, you will learn what earnest money is, local norms in Wayne County, how escrow works in Michigan, when deposits are refundable, and simple steps to protect your funds. Let’s dive in.
What earnest money is
Earnest money, often called an earnest-money deposit (EMD), is a good-faith payment you include with your offer to show the seller you are serious. If the sale closes, your deposit is typically applied toward your down payment and closing costs.
Your purchase agreement controls everything about the deposit. It specifies the amount, who holds it, how and when it is deposited, and the conditions for release or forfeiture. Once both sides sign the contract, the EMD becomes part of those binding terms.
In practice, the deposit reassures the seller that you will follow through. If you breach the contract, the seller may be entitled to keep the EMD, depending on the contract language. On the flip side, if you meet your obligations and the seller fails to close, the agreement can protect your deposit.
Typical amounts in Wayne County
There is no fixed legal amount in Michigan. Your EMD is negotiated with the offer and usually reflects price point and market conditions.
- Entry-level homes: many buyers in Downriver suburbs offer about $1,000 to $3,000.
- Mid-priced homes: buyers commonly offer $2,000 to $5,000 or around 1 percent of the purchase price.
- Higher-priced homes: 1 to 3 percent of the purchase price is typical.
In multiple-offer situations, buyers often use larger deposits or agree to quicker delivery to strengthen the offer. Local listing agents may have different expectations by neighborhood. Ask your agent for recent examples from Brownstown, Trenton, Wyandotte, and nearby towns so you can match what is winning.
Who holds your deposit in Michigan
Your deposit is placed in escrow and held in a trust account until closing. In Michigan, the holder is typically one of the following:
- A title or closing company acting as the escrow agent
- A licensed real estate brokerage using its trust account
- A real-estate attorney’s client trust account
The escrow holder keeps your funds in a non-operating trust account and only releases them according to the signed contract or written escrow instructions. At closing, your EMD appears on the settlement statement and is credited toward your cash to close.
How you deliver the deposit
Check your contract for the required method and timing. Common options include:
- Wire transfer to the title company or brokerage escrow account
- Certified or cashier’s check
- Personal check, though it can delay availability while it clears
Always get a written receipt and confirmation that the funds were deposited into escrow.
When your earnest money is refundable
Refundability depends on the contract. If your agreement includes contingencies and you follow the deadlines and notice rules, you can usually get your EMD back when you terminate under a valid contingency. Common buyer protections include:
- Inspection contingency: you have a set period to inspect. If you cancel within that period as the contract allows, the EMD is refundable.
- Financing contingency: if you cannot obtain a loan within the agreed time despite good-faith efforts, you may cancel and recover your deposit.
- Appraisal contingency: if the home appraises below the purchase price and you cannot reach a new agreement, you may be able to cancel and receive a refund.
- Title or survey contingency: if a title defect or survey issue remains unresolved as defined in the contract, you can typically terminate and get the EMD back.
- Sale-of-home contingency: if your purchase depends on selling your current home and you do not sell in time, the contract will guide whether the EMD is refundable.
Deadlines matter
Most agreements include strict deadlines and notice rules. Many also include a “time is of the essence” clause. If you miss a deadline or fail to give proper written notice, you could lose the right to a refund.
When sellers may keep the deposit
If a buyer breaches the contract, the seller may be entitled to retain the EMD as liquidated damages if the agreement says so. If the contract does not allow that, the seller may pursue other remedies. If there is a disagreement, the escrow holder will usually keep the funds in trust until there is a mutual written release, mediation or arbitration result, or a court order.
Quick examples
- You inspect within the agreed window and cancel per the inspection contingency. Result: EMD is typically refundable.
- You miss your financing deadline and later cannot close. Result: your EMD may be at risk.
- The seller cannot deliver clear title. Result: you can usually terminate and receive a refund per the contract.
Common timelines in Downriver
Timeline specifics are set by your contract, but these ranges are common in Wayne County:
- Inspection window: often 7 to 14 days after contract execution
- Loan commitment: about 21 to 30 days, depending on lender and closing date
- Appraisal: usually scheduled within 1 to 3 weeks of loan application
- Closing: often 30 to 45 days for financed purchases, sooner for cash
Your agreement controls, so mark your calendar and plan ahead with your agent and lender.
How to protect your deposit
A few simple steps can go a long way.
- Keep key contingencies in place until you are satisfied. Do not waive inspection or financing without understanding the risk.
- Meet every deadline and use written notice to terminate when needed. Ask for written confirmation of receipt.
- Get a receipt for the EMD and confirm that the deposit went into an escrow or trust account.
- Use a reputable local title company or established brokerage for escrow when possible.
- Verify wire instructions by phone using a trusted number from the title company’s website or your agent. Wire-fraud scams target real-estate emails. Never rely on email-only instructions.
What to do next
- Talk EMD strategy with your agent before you write an offer. Decide on an amount that fits your price range and the level of competition.
- Choose who will hold the deposit and confirm how you will deliver it. Prepare funds so you can deposit quickly after acceptance.
- Review your purchase agreement for contingency windows and notice requirements. Put all dates on a shared timeline with your lender and agent.
- Plan for appraisal and loan milestones early so you can stay on track and protect your EMD.
Ready to plan your offer in Brownstown or anywhere Downriver? Reach out to our local team for clear, step-by-step guidance from first tour to closing. Connect with Sarah Stoner to get started today.
FAQs
What is earnest money in a Michigan home purchase?
- Earnest money is a good-faith deposit included with your offer, held in escrow, and typically credited to your down payment and closing costs at closing.
How much earnest money should I offer in Wayne County?
- Many buyers offer $1,000 to $3,000 on entry-level homes, $2,000 to $5,000 or about 1 percent on mid-priced homes, and 1 to 3 percent on higher-priced homes, adjusted for competition.
Who usually holds the earnest money in Michigan?
- A neutral title or closing company, a licensed real estate brokerage’s trust account, or a real-estate attorney’s trust account, as specified in your contract.
Is my earnest money refundable if I cancel after inspection in Brownstown?
- If your contract includes an inspection contingency and you cancel within the inspection period following the notice rules, your deposit is typically refundable.
What happens to my deposit if I cannot get a mortgage in Downriver?
- If your agreement includes a financing contingency and you act in good faith within the deadline, you can usually terminate and receive a refund according to the contract.
How do I avoid wire fraud when sending my earnest money?
- Always verify wiring instructions by calling a known phone number for the title company, not a number from an email. Get a receipt once funds are delivered.
How quickly do I need to deliver my EMD after offer acceptance?
- Follow your purchase agreement. Many sellers prefer prompt delivery, and faster deposit timing can strengthen your offer in competitive situations.
